EUROPEAN FX UPDATE: Franc in favour as flight to safety intensifies

Analysis details (10:09)

CHF

Mindful of the ever present physical presence of the SNB, the Franc has been reluctant to go with the broad risk flow, or prevented from showing its true colours, but Usd/Chf has broken lower alongside the Eur/Chf cross as a potentially better gauge of the market tone amidst a more concerted bout of aversion. The former is inching closer to 0.9100 and latter has slipped beneath 1.0350 compared to peaks nearer 0.9181 and 1.0445 earlier in the week, so it will be very interesting to see how much intervention propped both pairs up before Friday’s declines when weekly Swiss bank sight deposit balances are published on Monday.

DXY/EUR/JPY   

The Dollar and index looks somewhat stymied following yesterday’s rebound to a new wtd high in the case of the DXY (at 95.864), as it retains a decent underlying safe haven bid/premium, but underperforms vs the Yen as well as the Franc, and even the Euro that is benefiting from a steeper pull-back in US Treasury yields relative to EGBs, in part. Note also, the index may be losing recovery momentum independently after falling just shy of Thursday’s best overnight and drifting down from 95.840 to 95.588 to help Eur/Usd keep its head above 1.1300, just, and pave the way for Usd/Jpy to reverse through 114.00. However, hefty option expiry interest may also influence direction for the Yen as 1 bn rolls off between 113.50-55 and 1.3 bn or so from 113.80 to 113.90.

GBP/CAD/AUD/NZD

All in retreat as sentiment sours, but with Sterling also taking on board dire UK retail sales and weaker GfK consumer confidence, as Cable gives up 1.3600+ status and Eur/Gbp corrects significantly after testing 0.8300 only yesterday. Meanwhile, a snapback in oil prices has not done the Loonie any favours in advance of Canadian consumption data and new house prices, with Usd/Cad back over 1.2500, though it is holding up better than its Antipodean peers as the Aussie and Kiwi reverse around 0.7200 and towards 0.6700 respectively. Note, option expiries may also have a bearing in Usd/Cad and Aud/Usd - see 7.05GMT post on the Headline Feed for strikes and sizes.

SCANDI/EM

A double whammy for the Nok given Brent’s hefty retracement and the aforementioned risk-off positioning, while the Rub continues to weigh up Russian diplomatic relations and bubbling tensions with Ukraine in the main vs faint prospects of some progres from latest talks with US officials on the topical and tough subject of security. Elsewhere, a knock-back for the Try irrespective of an improvement in Turkish consumer morale, but no such impediment for the Cnh or Cny following further easing by the PBoC, this time via short term SLF rates.

21 Jan 2022 - 10:09- Fixed IncomeData- Source: Newsquawk